How Trump is Changing Iran from the Inside

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The nuclear deal between Iran and the P5+1 nations is perhaps the main achievement of the President of Iran, Hassan Rouhani. The approach adopted by Donald Trump threatens to strip the Iranian government of public confidence and exacerbate the already difficult situation inside the country. At the same time, the reformist president’s political opponents are trying to take advantage of his failures, which makes stabilizing Iran an even more difficult task.

The Economy after Trump

Donald Trump had become a major factor for the Iranian economy even before he made the decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA). Following Trump’s victory in the 2016 presidential elections, most major western companies put a hold on new projects they had been developing with Iran, a move motivated by Trump’s signals that sanctions against the country could be reinstated at any moment. Consequently, the Sword of Damocles has been hanging over Tehran ever since Trump took office, as the United States could reintroduce sanctions whenever it sees fit. This has robbed Iran of the lion’s share of global investments.

For the Iranian people, the announcement that the United States was withdrawing from the nuclear deal intensified concerns about the country’s economic future. Formally, new sanctions had not yet been introduced; however, a number of western companies had already started to wrap up their operations in Iran. This led to financial panic, which was reflected in the devaluation of the national currency. The price of the U.S. dollar ballooned to 90,000 rials, an increase of 250 per cent from end-of-year 2017.

Having said this, it is true that President Trump’s policy has contributed to the current economic difficulties of Iran, but it is by no means the cause of the problems. On the whole, Iran’s problems have been cultivated at home – corruption, excessive state involvement in the economy, poor management, absence of a suitable legislative system, and lack of economic transparency. A more favourable investment climate in the country would surely attract small- and medium-sized companies that are not particularly susceptible to U.S. sanctions. But this is not the case.

The devaluation of the Iranian rial is particularly telling. The rial may have hit record lows against the dollar only in late June, but the skid had begun as early as the end of winter – i.e. before the United States announced its withdrawal from the nuclear deal. We can thus surmise that Trump’s decision with regard to Iran does not so much create new problems as it does exacerbate existing ones.

The Iranian Protest

The most recent currency spike led to protests in Tehran and several other cities around the country. The demonstrations were localized and did not snowball into serious clashes, although several sources reported a number of detentions.

Major incidents of civil unrest in Iran took place in the winter. Localized protests have since become a regular occurrence in the country. In general, these protests do not develop into clashes with law enforcement and are economic or social in nature. The “currency demonstrations” can thus be seen as a continuation of this trend, which points to serious systemic discontent among the Iranian people.

The environment is another major factor behind protest activities. A large part of Iran suffers from drought, and the situation is getting worse with each passing year. For example, in early July, the people of Khorramshahr in Khuzestan Province took to the streets to protest the lack of drinking water. The demonstrations turned into clashes with the police, resulting in at least ten people being injured.

On the whole, Iran’s economic and environmental issues are systemic in nature and cannot be resolved in the short term. This means that there will always be the potential for social discontent, and any aggravation of the situation could lead to protests.

Crisis of Reformers

The election of Donald Trump as President of the United States and the country’s subsequent withdrawal from the nuclear deal have proven to be a real test for President of Iran Hassan Rouhani and his team. His promises to overcome Iran’s domestic problems after the lifting of the sanctions have suddenly lost their foundation. As a result, Rouhani has fallen under criticism both from his own voters, who felt that they had been deceived, and from his political opponents (the conservatives).

In the past, political factions within Iran have always rallied together in the face of a common threat. The situation today is somewhat peculiar, as there is growing friction within the political elite, with some even calling for the impeachment of the president. According to some reports, the conservatives have been concocting a plan since May 2017 to force the Rouhani government to resign, and some reformers support the conservative wing’s claims against the president. Others are calling for President Rouhani to respond to the conservative’s claims or resign his post.

The situation is further aggravated by the fact that the conservatives and their supporters incite the people to protest against the government. For example, it was the conservatives who instigated the demonstrations in Mashhad in December 2017 that proved to be the spark for the winter protests. The initiative quickly escalated out of control and turned into the largest unrest the country had seen in years, leading to clashes with the police and dozens of deaths.

It would seem that the forces which see Hassan Rouhani’s policies as posing a threat to their interests following the nuclear deal are the ones prepared to take such decisive steps. These policies include the President’s attempts to fight corruption, take certain financial assets away from military and state organizations, and make the system as a whole more transparent. For example, the government chose to publish the names of organizations that receive rials from the government at a preferential rate as one methods of combating the devaluation of the currency. The thinking behind this is that the difference between the official exchange rate (42,000 rials to the dollar) and the actual exchange rate (around 90,000 rials to the dollar) leads to corruption and abuse.

Hassan Rouhani has responded to the accusations made against him by announcing that his administration has no plans to resign. Ironically, the reformist president has found his biggest supporter in a man traditionally considered to be a symbol of the conservative wing: Supreme Leader of Iran Ali Khamenei. Khamenei supports the fight against corruption in the country, calls for maintaining the stability of the system, and believes that ensuring the President serves his term is crucial to this. With the support of the most influential person in the country, Rouhani is able to not only hold onto his position as President, but also continue with his programme to transform the country, despite strong opposition from a significant portion of the conservatives.

Popular Support

One of the key problems for Iran’s development is the question of legitimacy. In order for the system to function normally, the people need to believe that the regime is capable of resolving its problems and satisfying their basic needs.

Calls for change have been growing steadily over the past 30 years. The reform movement appeared as a response to these calls and as a way of carrying out reforms within the system. However, conservative pressure on the reformers, as well as the internal ineffectiveness of the movement itself, have led many to believe that it is no longer capable of offering social change. This loss of faith in the reformers has been accompanied by a loss of faith in the system as a whole. This process could carry an existential threat for the country.

The protests over the past year have demonstrated an alarming trend: growing numbers of the country’s poorest citizens are taking part in protest activities. In the 2000s, protests were, on the whole, the prerogative of the urban middle class and students. This means that the issue increasingly goes beyond the boundaries of personal freedoms and calls for democracy and takes on the features of a revolt of the poor and disadvantaged.

Despite active criticism of Hassan Rouhani from all sides, no one has come forward with an intelligible alternative method for resolving the growing economic, environmental and social problems. The Supreme Leader’s vote of confidence in the President means that the latter can continue his programme to transform the country, although the effects of these transformations will not be immediately evident, even if they are successful. The situation could become even worse if the current government is unable to preserve the nuclear deal. One way or another, the country’s political elites need to concentrate on solving the problems at home; otherwise, the probability of an economic crisis with unpredictable social and political consequences will only grow.